Contemporary Business and Management Challenges in China

In today’s global context, Chinese companies face significant challenges in internationalising their services – not least that posed by contrasting styles of leadership. However, Chinese companies and government are responding to these challenges and changes are happening fast, putting China well on the way to becoming a global giant.

China is like no other country when it comes down to understanding business and management challenges in light of their economic development. At present, the country still has to be seen as a transition economy shifting focus from manufacturing to service. Together with this change, investments in infrastructure and real estate are diminishing – too many ghost towns and property bubbles have come to the surface – and a further urbanisation wave of rural migrants moving to the cities is predicted. These shifts impact the local economy by significantly increasing domestic spending. At the same time, these changes also bear consequences on the international dimension of China’s economy. Being an open economy it is important to present oneself as an attractive but also trustworthy business partner. As a result, China has left behind their obsession with double-digit growth and is trying to portray an image of its economy as slowing down – as decided in the new 5-year plan approved by the China’s National People’s Congress in March 2013 – to make it appear sustainable and at the same time still good enough to invest in. Current efforts by the Chinese government to borrow from the bond market signal that they indeed want to move away from their model in which (state-owned) banks finance their own stimulus programs – a strategy seen as manipulative and unsustainable by the rest of the world.

It is imperative for every international business to pay attention to what is happening in China, not only because many of those changes are still surrounded with a high degree of uncertainty, but primarily because something has changed in the relationship between the West and China. It is not the case any more of Western business moving into China. The opposite is becoming truer every day. This is not to say that Western companies have successfully penetrated the Chinese market and now the time has simply arrived for Chinese companies to do the same in Western markets. No such coordination of the market game exists! Many foreign companies in China still have to deal with local protectionism, still face the disadvantage of lacking the speed and flexibility of their local competitors, and still need to localise their products and services to a very high degree. What is happening is that Chinese companies are becoming more successful every day in competing at global levels. One important driver of China’s successful business approach so far is a strong motive for strategic asset seeking. Such cases are many: Fosun took over IDERA, Phoenix Media over the US PIL, Haier over Fisher & Paykel, TCL over Alcatel-Lucent, Geely over Volvo Cars, etc. First, they wish to accelerate their learning experience on how to compete at the global level. Second, acquiring companies at the global level will help them to strengthen their reputation back home. After all, for most of these companies the biggest market worldwide is still the local Chinese market. Of course, despite all these contemporary successes Chinese companies are constantly evolving in how they do business, and from that perspective they also have to consider their own unique business and management challenges in order to continue to grow. As a senior HR manager at Haier puts it: in terms of internationalisation, the gap between where we are now and where we want to be is still huge.

About the Authors

David De Cremer is the KPMG chair of management studies at the Judge Business School, University of Cambridge and a visiting professor at China Europe International Business School (Shanghai). Email: d.decremer@jbs.cam.ac.uk

Jess Zhang is the Associate Director of Corporate Relations (Asia) at HULT International Business School and formerly the Centre Manager of Centre on China Innovation at China Europe International Business School (CEIBS). Email: jess.x.zhang@gmail.com

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All China Review is essential reading for all who seek balanced reviews and accurate surveys into the world’s most exciting economy and the largest democracy in the world – China. As we observe the rise of China and its growing influence in the world’s development, we aim to uncover the most aspiring stories, pivotal events and innovative ideas that are shaping all aspects of China and its relationship with the rest of the world.